New Country Reports market report from Business Monitor International: "Tanzania Business Forecast Report Q4 2012"
Boston, MA -- (SBWIRE) -- 11/12/2012 -- Core Views We expect Tanzania's economy to recover in 2013 and forecast 7.5% growth, up from an expected 5.5% in 2012. Underpinning our forecasts is an expectation that falling inflation and recovering power generation will lead to an improvement in the domestic macroeconomic climate, while an increase in gold production and healthy economic outlooks for Tanzania's neighbours will boost the external sector as well. Inflation will decline only very slowly over the course of 2012 as falling food prices and improving base effects are partially offset by high energy prices. Although our relatively high end-2012 inflation forecast of 12.6% is largely driven by supply-side considerations, we expect that the Bank of Tanzania will keep the reins tight on monetary policy to stave off the prospect of demand-pull inflation and to support the currency. Defections from Chama Cha Mapinduzi (CCM) are a clear indication that all is not well in the ruling party in Tanzania. A looming succession battle and a rise in popularity of opposition Chama Cha Demokrasia Na Maendeleo will make life difficult for CCM leadership as it seeks to reverse the party's decline. Major Forecast Changes Revisions to 2011 data mean that Tanzania will post an even larger current account deficit in 2012 than we had previously forecast. A high oil import bill, strong demand for capital goods and relatively weak growth in gold exports will see the shortfall expand to US$4.21bn in 2012, from an estimated US$3.43bn in 2011. We believe things will improve from 2013, however, as new gold production and lower demand for and prices of oil lead to a narrowing of the shortfall to US$4.18bn that year. Key Risks To Outlook The major risk to our outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation has been the major driver of rapidly rising inflation) but would also once again hamper hydroelectricity production, raising costs for businesses and, by extension, consumers. The country's infrastructure deficit is another concern; a failure to make significant progress would likely hold the economy back from reaching its significant potential.
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